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Money and Millennials - Part I: It’s Not Your Fault You Still Live with Your Mom

Millennials, the diverse patchwork of talented young Americans from late teens through mid-30s, now represent the nation’s largest generation at roughly 83 million strong. That accounts for about a quarter of the U.S. population1. While there’s clearly no single trait that defines them, there are trends that help paint a picture of this generation that came of age at the dawn of the third millennium.

Over the years, Millennials have sometimes been harshly miscast as under-motivated tech geeks who still live at home with their parents.

But you may be surprised to learn that Millennials are more driven to succeed in their careers than the generations that preceded them. More than half of working Millennials (53%) said they are motivated to reach the very top of their career, compared with just 38% of Generation X and 25% of Baby Boomers, according to a study by Experian.2 In addition, 28% of employed Millennials described themselves as workaholics, which is on par with both Boomers and Gen-Xers.

Most Millennials say they would favor a career as an entrepreneur – and many have already acted on that notion. Millennials account for about 25% of all new start-up businesses,3 according to a study by the Kaufman Foundation, and 27% of Millennials are self-employed.4 About half to two-thirds of Millennials are interested in being an entrepreneur, according to the U.S. Chamber of Commerce.

Millennials are also the most educated generation so far. About 34% of 25 to 29 year-olds holds a bachelor’s, master’s, professional or doctoral degree, a higher share than in any time in data going back to 1968, according to Matthew Chingos, a senior fellow at Brookings.5

But despite their strong education and ambitious bent, the perception that many Millennials still live at home with their parents is actually based in fact: about 40% of Millennials are currently living with parents or relatives – the highest rate since 1940, according to a 2016 analysis by Trulia.6 In fact, more Millennials live in their parents’ home than any other living arrangement – including living with their spouse – according to a 2017 U.S. Census Bureau report.7

But there are a couple of good reasons Millennials are staying at home in record numbers – low wages and high student loan debt.

The Great Recession led to the loss of millions of jobs just as many Millennials were entering the work force. As a result, finding well-paying career opportunities has been difficult. In 1975, only 25% of men, aged 25 to 34, had incomes of less than $30,000 per year (inflation adjusted). By 2016, that share rose to 41% of young men, according to the U.S. Census Bureau report. But while men have seen their workforce roles diminish, women have taken a more prominent role. Between 1975 and 2016, the share of women aged 25 to 34 who were homemakers fell from 43% to 14% as more women flooded the workforce.

When compared with the generations before them, Millennials have gotten the short end of the stick. The average annual wage of Millennials is about 40% lower than the average wages of Gen-Xers and Baby Boomers, as the graph below shows:

Source: Experian8

While Millennials comprise the largest segment of the working population at 53.5 million, they also represent the largest segment of unemployed, at about 3 million, compared with about 2.3 million ages 35 to 54 and about 1.3 million over 55, according to the U.S. Department of Labor.9 (See: Paradoxes of the U.S. Employment Market)

Source: Pew Research Center - Pew Research Center tabulations of monthly 2014 and 2015 Current Population Surveys, Integrated Public Use Microdata Series (IPUMS)

Student loan debt is the other culprit keeping Millennials stowed away in their parents’ basement. In all, about 44 million Americans have student loan debt totaling about $1.25 trillion, and at least 30 million of those are under 40 years old. The average monthly student loan payment for individuals between 20 and 30 is $351.10 That’s a particularly burdensome debt for the age group with the highest unemployment rate and the lowest average annual wage.

According to the U.S. Census Bureau report, 41% of Millennial age families had student debt in 2013, up from 17% in 1989. The amount of debt has also been growing. The median was $6,000 in 1989 (inflation adjusted) and nearly tripled to $17,300 by 2013. That may explain why about 1 in 3 of all 18- to 34-year-olds still rely on their parents for financial assistance.

Marrying Later – But Still Pairing Up

Because of their financial difficulties, Millennials have been delaying marriage, but that hasn’t stopped them from pairing up and living with their partner, according to the U.S. Census Bureau report. The average age of marriage for women has risen from 22 to 27 since 1980, but the age when people start living together has stayed consistently at about 22.

In fact, the number of young people living with a boyfriend or girlfriend has increased more than 12 times, making it the fastest growing living arrangement among young adults. “In other words,” states the report, “young adults are still starting relationships at the same age that their parents did, but they are trading marriage for cohabitation.”

While Millennials have delayed marriage, their chances of getting married by the age of 40 have remained almost the same as they were in 1995. Women had a 59% chance of marrying by the age of 25 in 1995, but only a 44% chance by 2010. However, their chances of being married by age 40 had declined only 2% from 86% to 84%.

Unlikely investors

Because of their financial straits, Millennials are the least likely age group to invest in the stock market, but that has been changing. Only about one-third of individuals aged 18 up to 35 say they invest in the market either directly by buying stocks or through mutual funds or through a retirement account, according to a 2016 Bankrate survey. (See chart below.)

But while they are off to a slow start investing, the older Millennials have been picking up the pace: 44% of those 26 to 35 say they are invested in the market versus only 18% of those between 18 and 25.

Source: Bankrate Money Pulse Survey, June 16-19-2016

Driven, diverse, tech-savvy, and well-educated, most Millennials have not yet achieved the level of success to which they aspire, but as they reach their 30s and 40s, their financial and career success seems likely headed for improvement. As their income rises, the next frontier for savvy Millennials may be establishing a greater presence in the investment markets.

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